Industrial Preservation & Optimization Policy and Zoning Code Amendments

Purpose

The City of Morgan Hill seeks to support a diverse local economy and an expanded tax base by preserving existing job-generating land. The City’s General Plan identifies strategies to diversify the economy and increase both the quality and quantity of job opportunities to support the community’s well-being. Industrial lands are critically important to the economic health of the City and community by providing local jobs and supporting industries that contribute to the local economy.

The Industrial Land Preservation & Optimization Policy, once adopted, in conjunction with the 2035 General Plan and the Economic Blueprint, will protect the City’s limited supply of industrial land to support long term economic vitality. The Policy identifies five key goals that provide direction and guidance when developing, implementing, and managing policies, programs, and projects, including implementation of the Zoning Code and General Plan, as they relate to industrial uses and industrial business parks.

To preserve and optimize Morgan Hill’s limited remaining industrial land inventory, the City's goals are:

Encourage the attraction and expansion of research and development (R&D), office, and advanced manufacturing uses.
Prohibit stand-alone ecommerce warehouse and distribution uses.
Prohibit General Plan conversions of industrial lands that cause a net loss of industrial employment lands.
Protect existing industrial lands and business parks by prohibiting non-compatible uses, such as community assembly and recreational uses, while expanding compatible uses.
Encourage conversion of commercial lands to industrial lands where appropriate.

The Industrial Land Preservation & Optimization Policy supports amending the current zoning code to minimize and reduce incompatible uses within the industrial lands, while expanding compatible uses in the medical, healthcare, and medical office and clinics industries that meet current market demand, create quality jobs, and improve the quality of life for residents.

Industrial Land Availability

Industrial lands provide local jobs and taxes to support City services. In 2013, there were 294 acres of vacant industrial land available. As of 2021, Morgan Hill has approximately 120 acres of industrial land remaining for development and virtually no existing industrial buildings available for lease or sale. Over the past eight years, industrial land inventory has declined by 59 percent and vacancy rates in office space and R&D are at an historic low of 2.9 percent. Preserving existing industrial parks and optimizing remaining industrial lands will support the City's economic prosperity, offer job opportunities, and preserve the quality of life in Morgan Hill.

In addition, over the last 15 years, the City has issued 25 Conditional Use Permits (CUP), which have repurposed a total of 68 acres of property in industrial areas to low intensity or non-industrial uses, predominantly mini-storage, recreation, community assembly, and medical office space. It is highly possible that all available industrial land may be depleted prior to the timeline of the newly adopted Morgan Hill 2035 General Plan.

Preserving Industrial Lands For Jobs and Housing Needs

Morgan Hill is a predominantly a residential suburb and job exporter, with only 25.1 percent of Morgan Hill residents working within the City limits. With 21,775 employed residents and 18,428 jobs in Morgan Hill, the ratio of jobs to resident workers is 0.85. This indicates that there is not a productive balance between the types of jobs and the skills of residents.

There are several industry categories where the makeup of Morgan Hill business does not mirror the rest of Silicon Valley. Information, professional, scientific, education, and healthcare service careers are under-represented in Morgan Hill. As a result, nearly 75 percent of commuting residents drive over 30 minutes to and from work alone. Even with High-Occupancy Vehicle (HOV) lanes existing most of the distance between San Jose and Morgan Hill, this pattern negatively impacts quality of life, stresses the City's and region’s transportation infrastructure, and is environmentally unsustainable.

Taking into account the existing housing crisis and increasing pressure to meet the growing housing demand, the push to convert industrial land to residential use will only intensify. Currently, the California State Legislature is considering various legislation that could potentially allow the conversion of unused or under-utilized commercial lands to residential lands. Senate Bill 6 (SB6) is just one example of this type of legislation.

Along the same lines, to address the growing housing to jobs ratio, the City needs to continue to protect employment lands against conversion and continue to attract high-quality jobs and the businesses that produce them. Expanding job opportunities in the aforementioned industries, as well as continuing to attract advanced manufacturers, can help improve the match between resident skill sets and the jobs offered in Morgan Hill.

Upcoming Meetings

In advance of seeking the approval at the Planning Commission and City Council, City staff is conducting outreach to property owners, businesses, and the community for their feedback. We hope you will participate in this important conversation by attending one of the community meetings below:

City Council Regular Meeting
Presentation scheduled for March 2, 2022, 7:00 p.m.

Members of the community who would like to participate may do so virtually: https://bit.ly/MHCityCouncilMeeting or call 669-900-9128, then enter the meeting id: 873 3200 8380.

Background & Past Actions

2017 Economic Development Blueprint

The City Council unanimously adopted the 2017 Morgan Hill Economic Blueprint, which is an economic development strategy intended to foster economic growth by attracting investment, development, and jobs that will ensure fiscal sustainability and vitality for the community. The Economic Blueprint is the result of an extensive community engagement effort with residents, businesses, community-based organizations, community leaders from various industries, industry leaders from outside of Morgan Hill, and economic development professionals. The strategy is designed to guide land use, policy development, and budget decisions. The Economic Blueprint identifies four industries, 13 strategies, and 35 action items that are key to Morgan Hill’s future growth and further fiscal sustainability.

The four key industries identified with the Economic Blueprint are:

Innovation and Advanced Manufacturing -- Grow existing companies, attract new industry and grow professional jobs.
Retail -- Grow retail offerings and strengthen commercial nodes.
Tourism -- Grow leisure, agriculture, wine country, and recreational tourism.
Health Care -- Grow and foster the medical service and diagnostics industry by attracting services and facilities.

Within the Innovation and Advanced Manufacturing work program, the Blueprint calls for two specific strategies and city actions:

Adoption of an employment (Industrial) land preservation policy.
Strengthen the General Plan language to prevent conversions of Industrial lands.

July 2020 Economic Development Seminars

The Economic Development Team, in partnership with the Urban Land Institute (ULI) and the Silicon Valley Economic Development Alliance (SVEDA), hosted four independent seminars with industry experts, and planning and economic development professionals to better understand today’s market at a national, regional, and local level. The seminars took a deep dive into the future of industrial and retail sectors, especially post-Covid-19, and identified tactical strategies for Morgan Hill to consider that support the City's industrial preservation and retail concentration goals.

September 2020 Planning Commission Meeting

The Planning Commission conducted the first Industrial Preservation Policy Workshop on September 22, 2020. The findings of the July 2020 ULI and SVEDA seminars were shared during this meeting. The Planning Commission took no immediate action, besides accepting the report and providing feedback on the industrial preservation concentration policies.

October 2020 City Council Meeting

The City Council Adopted-Ordinance-2317---Industrial-Ordinance (ca.gov). This ordinance was a City-initiated code amendment to the current City Zoning Code to refine industrial land use definitions and uses. The ordinance prohibited large fulfillment centers/heavy distribution, parcel sorting centers, and parcel hubs.

Also included in the ordinance were Staff recommended changes to the Design Permit Process within the Municipal Code to require the Planning Commission to review buildings and developments of significance, for example, certain sizes of buildings and developments.

March 2021 Planning Commission Meeting

On March 9, 2021, the Planning Commission conducted a second Industrial Preservation Policy Workshop to review proposed changes to the Zoning Code to support an industrial preservation strategy. The Commission took no immediate action, but instead, reviewed, discussed, and provided feedback on the proposed changes to Title 18.26.020 Land Use regulations for alignment with industrial preservation goals.

January 2022 Chamber of Commerce Presentation

A presentation on the Industrial Preservation & Optimization Policy and Zoning Code Amendments was given at the Morgan Hill Chamber of Commerce’s January Economic Development Meeting. The virtual meeting was recorded and available on YouTube.

January 2022 City of Morgan Hill Townhall

Economic Development hosted a townhall on January 27 to cover the industrial land preservation topic in detail with the community. The virtual meeting was recorded and available on YouTube. A PDF presentation is also available.